FEMA unveils plan to waive debts for victims of Katrina

Total represents less than 5% of $8b distributed

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FEMA has asked David Bellinger, 63, who is blind, to pay back $3,200 in aid he received to help pay rent in a new apartment.

By Michael KunzelmanAssociated Press
February 09, 2012

NEW ORLEANS - The Federal Emergency Management Agency announced yesterday that it is rolling out a plan to waive debts for many victims of Hurricane Katrina and other disasters who may have mistakenly received millions of dollars in aid.

The debts, which average about $4,622 per recipient, represent slightly less than 5 percent of the roughly $8 billion that FEMA distributed to victims of Katrina and other 2005 storms. Some of the overpayments were caused by FEMA employees’ own mistakes, ranging from clerical errors to failing to interview applicants, according to congressional testimony.

FEMA is expected to mail out roughly 90,000 letters next week to inform disaster victims that they may be eligible for debt waivers. The recipients will have 60 days to respond and request a waiver.

Last year, the agency sent out debt notices in an effort to recover more than $385 million it says was improperly paid to victims of hurricanes Katrina, Rita, and Wilma in 2005.

People are eligible for waivers if their household adjusted gross income on their most recent federal tax return was less than $90,000 and a FEMA error was solely responsible for the improper payment. The improper payment cannot involve any fraud or misrepresentation by the recipient.

The waiver applies only to disasters declared between Aug. 28, 2005 - the day before Katrina’s landfall - and the end of 2010. Households earning more than $90,000 could be eligible for partial waivers.

Another requirement is that collecting a debt would have to be “against equity and good conscience,’’ meaning that it would be “unfair under the circumstances of the case to collect the debt,’’ FEMA says.

In their responses to the waiver letter, disaster victims must explain why collecting the debt would cause them serious financial hardship, FEMA says. Recipients also must specify how they spent the money and why they cannot return the funds to FEMA.

In December, Congress approved legislation that allows FEMA to waive many of the debts. Before President Obama signed it into law, FEMA had said it was required to make an effort to recover improper payments, even if the recipient was not at fault.

Senator Mary Landrieu, a Louisiana Democrat who was one of the provision’s sponsors, praised FEMA for “moving swiftly and aggressively’’ to implement a waiver plan.

“This announcement will bring great relief to many honest disaster survivors who never intended to misuse funds or take anything to which they were not entitled,’’ Landrieu said. “To have forced people who experienced great tragedy to pay large sums of money back to the government because of someone else’s mistake would have been incredibly unfair.’’

FEMA’s collection efforts are not limited to the 2005 storms. The agency has mailed out more than 6,000 debt letters to survivors of other recent disasters, including floods.

About 2,500 recipients, including 930 victims of the 2005 hurricanes, had appealed their debt notices as of December. FEMA says about 30 percent of those appeals successfully erased at least some of the debt.

Davida Finger, a law professor at Loyola University in New Orleans who has helped several people appeal their debts, said it is unclear how FEMA will decide whether an improper payment resulted from a mistake by the agency or the recipient.

“There seems to be a lot of subjectivity and discretion in making these decisions,’’ she said.

One of Finger’s clients is David Bellinger, 63, a blind man who rented an apartment in Atlanta after Katrina wrecked his New Orleans home. FEMA has asked Bellinger to pay back more than $3,200 in federal aid he received to help pay his rent. The agency claimed he received a duplication of benefits. Bellinger says the agency is mistaken but FEMA rejected his appeal in December.

“The people who can least afford to pay this money back are being hardest-hit by this,’’ Finger said.

Landrieu said the waiver provision had encountered some opposition before a compromise measure was approved by Congress.

“This was not easily done,’’ she said. “There was some pushback about doing any forgiveness whatsoever.’’

Senator Mark Pryor, an Arkansas Democrat who wrote the provision, said FEMA has significantly improved its process for distributing disaster aid since Katrina.

“My sense is if there were a disaster today, you would not see nearly as many mistakes with FEMA,’’ he said.

FEMA initiated the debt-collection process in 2006, but a federal judge in New Orleans ordered the agency to suspend the effort in 2007 after a class-action lawsuit challenged FEMA’s push to recover alleged overpayments. FEMA later paid more than $2.6 million to settle the claims and reinstituted the process last year.